Monday, November 21, 2011

Safety Tips with Options Trading

By Donald Scott


I have ventured long to find success in the stock market. And after trading options for about ten years now, I am delighted to make a lot of friends along the way. Of the hundreds of option traders I have met, I am surprised to know that only a few of them are making money from the stock market. Thus, I've been really wondering why more and more people are being drawn into the marvel of the stock market even if most of them end up losing their trading capital.

This is a very remarkable topic we will discuss. Firstly, despite the risk of losing money, I think traders are enjoying the challenge that goes along the profession. We enjoy looking at probabilities, analyzing trade scenarios and doing the research. We are amused by dealing with the stock market and options, and the challenge is the very factor that drives us to push even further. There is an emotional drive that makes us want to improve; it's the competitive nature within us.

Aside from the challenge that comes along with option trading, another reason why people are holding on to this investment vehicle is because this profession involves a lot of creativity. There are numerous strategies in option trading that can be developed if you keep an open mind. This makes option trading a wide universe for investors to explore.

Then a question remains as to why several option traders are losing money in the stock market. The easiest answer is that average option traders do not have the skills and knowledge to properly adjust the position of their options. True as it may be, we need a much better answer to that.

Until recently, I hadn't realized what the underlying issues of the problem were. Failure in option trading is not entirely attributable to a trader's adjustment strategies. Honestly, the most experienced option traders have mastered both money management and making sensible adjustments to their portfolios. Failure sets off from the very moment the trade is started. Being a good option trader and having risk management skills alone cannot guarantee long-term success in trading options unless we learn to construct option trades with a lower-risk factor from the very start. This is the key to long-term success in option trading.

It is by studying at San Jose Options that I have recently come to this conclusion about my previous failure in option trading. Through their course, I have learned to construct trades with lower risk but still with high probability and returns. I have learned to construct trades in such safer ways than I have ever come across in my entire career before. Remember, failure is what awaits us if we do not begin to focus more on the way we construct our option trades from the get-go, for the problem in option trading does not lie on our adjustments. Lastly, I wish you luck in your option trading, and, again, I am delighted to have met yet another option trader along the way.




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